With operating income of $662 million, $1.68 per share, and a combined ratio of 81.6 setting third-quarter records, Warren, N.J.-based Chubb Corp. management told analysts yesterday that it will top full-year earnings figures estimated in July.
Third-quarter operating income, excluding after-tax realized investment gains, jumped 14 percent over third-quarter 2006 operating income of $579 million, or $1.37 per share.
Net income, including realized gains, was $738 million for the quarter, or $1.87 per share, jumping 22 percent from $604 million, or $1.43 per share for last year's third quarter.
For the first nine months, net income rose 15 percent to $2.2 billion, or $5.33 per share.
John Finnegan, chairman and chief executive officer, said, "We earned more in the first nine months of 2007 than we earned in any full year of our history with the exception of 2006," referring to year-to-date operating income of $1.9 billion, or $4.81.
As a result, Chubb will likely surpass the low end of full-year earning guidance provided back in July–an operating income range of $5.70 to $6.10 per share, he said, noting that the new guidance estimates from Chubb call for operating earnings in the range of $6.05 to $6.15 per share for the year.
Mr. Finnegan noted that one thing that hasn't changed in the guidance is a conservative assumption for catastrophe losses of 4.0 points of the combined ratio for the year. The implied cat impact for the fourth quarter is 7.7 points, he said.
In the third quarter, catastrophe losses added just two points to the overall combined ratio, but executives said that the company will be impacted by losses from the California wildfires.
Still, Mr. Finnegan said the 7.7 point fourth-quarter cat assumption "is not based on actual losses to date in California, but on the fact that we have insured in some of the potentially affected areas."
Given "the uncertain impact of these fires," he said Chubb thought it was prudent to simply maintain the existing cat-loss assumption rather than trying to speculate on the level of fourth-quarter cats.
Vice Chairman John Degnan said that three of the 13 areas that were known to be burning yesterday were of direct concern to Chubb based on its exposures from writing high-net worth insureds.
To date, however, he said, the company had only 25 claims it was aware of based on the locations of its insureds.
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